Biden will still be a “betcher” on the Fed’s interest rate cuts
someone should do it president biden He knows the Fed isn’t going to give him a politically convenient rate cut.
You probably remember that the president said last month that he couldn’t guarantee a rate cut, but it was certainly possible. Betting aggressively that the Fed will cut interest rates.
“I can’t give you any guarantees, but I’m sure interest rates will go down, because I’m confident that those little organizations that set interest rates will definitely bring them down,” Biden said in Philadelphia in March. said in a speech.
If Donald Trump had said those words, the establishment media and economists would have been furious at the president’s violation of the norm that he doesn’t even appear to be putting pressure on central banks. Dew. But since it was Biden who spoke, none of those complaints were heard. What is beyond common sense for Mr. Trump is quietly accepted by Mr. Biden.
As we noted when President Trump publicly criticized the Fed, Establishment media and commentators reacted with shock and horror.-This is a rule that is more often broken than observed, especially when Fed policy is stricter than the occupant of the White House thinks is appropriate. To be sure, there is an astonishing level of hypocrisy and dishonesty at work behind the varying reactions of journalists and analysts, but that is not news to anyone at all.
The stronger-than-expected rise in the Consumer Price Index (CPI) in March sent many Wall Street analysts and economists back to their spreadsheets and whiteboards. The near-universal prediction that the Fed would cut interest rates in June was now demonstrably wrong.At one point, almost All Wall Street economists expected a rate cut in June..
That all changed. Futures markets currently suggest there won’t be a rate cut until September, but even that is far from certain. Bank of America’s U.S. economics team, led by Michael Geipen, quickly pushed back the outlook for interest rate cuts from June to December, warning: There are significant risks that rate cuts could start later. The rest of Wall Street is sure to follow suit.
Not Biden. He stands by his own prediction that cuts will occur.
“I stand by my expectation that there will be a rate cut by the end of the year,” Biden said at a White House press conference on Wednesday.
I have to wonder if Prime Minister Fumio KishidaI was standing nearby as Biden made his prediction, and I couldn’t help but laugh at his confidence in it. Japan’s politicians would be wiser than to try to gut the central banker and force it to shape monetary policy in a politically expedient way.
President Joe Biden (right) and Prime Minister Fumio Kishida arrive for a joint press conference in the White House Rose Garden on April 10, 2024, in Washington, DC. (Andrew Harnik/Getty Images)
The data screams no cuts this year.
The Oval Office can be a very isolating place, so it’s unclear whether Mr. Biden understands how much the inflation situation has changed. His economic advisers may not be communicating the hard facts in a language the president understands. True, he won’t learn much if he relies on something like, for example: Paul Krugman’s writingsstill declares that, as far as we know, inflation was temporary after all.
Maybe someone could smuggle him a copy of Breitbart Business Digest.We’ve been pointing that out for months. Inflation stopped falling at some point last year., just as the Fed stopped raising rates and began hinting that a rate cut was coming. This was no coincidence. Lowering interest rates tightens monetary policy, while leaving interest rates unchanged while implying that lower interest rates are coming is a form of easing. The army of economists employed by the Fed somehow missed this.
If you’ve talked to a real estate agent or mortgage broker over the past nine months, you’ve probably heard that it’s a good time to buy a home, even though mortgage rates are still high. The idea is You can refinance because the interest rate will be lower. You’ll have access to more affordable loans right away. If you wait until interest rates actually fall, home prices will likely rise and you may be priced out of the market.
The same logic works for expanding your business. If companies expect interest rates to fall, they are willing to finance projects at higher rates now because they expect to refinance at lower rates. So, With the expectation that interest rates will fall, current interest rates are less restrictive than they would otherwise be..
The facts on prices do not favor the idea that a rate cut is imminent. Core inflation, as measured by the Consumer Price Index (CPI), rose at an annual rate of 4.5% in the first quarter, up from 3.3% at the end of last year. The Personal Consumption Expenditure Price Index is lower than the CPI, mainly due to the lower weight of housing, but it is also trending upward.Three-month annualized based on Wednesday’s CPI and Thursday’s Producer Price Index PCE inflation likely to be 3.9% or 4% When March numbers are released later this month.
The closing price of April 10, 2024 is displayed on the floorboards of the New York Stock Exchange. Stock prices fell across the board following the release of the latest inflation data. (Spencer Pratt/Getty Images)
Even the most dovish members of the Federal Open Market Committee have no intention of starting to cut rates when inflation is rising and running at twice the target.That’s especially true if Unemployment rate has been lower than the Fed’s long-term forecast for many years. What’s the urgency for cuts when unemployment hasn’t been this low for a long time since we drafted young people into the military and sent them to fight communists in Southeast Asia?
Biden’s election message dashed by resurgent inflation
biden The Fed is desperate to cut interest rates That’s because high interest rates are weakening his re-election bid. A rate cut would signal a victory over inflation, a victory Biden has repeatedly declared, only to be humiliated by a resurgence in price pressures. Additionally, lower interest rates could boost the affordability of homes, cars and appliances, perhaps leading the public to take a less harsh view of Biden’s economic management.
The timing doesn’t work out for Biden. Even if the Fed decides it can cut rates as early as September (which is unlikely given the momentum of inflation heading into the second quarter), the credibility of the Fed’s stance transcends politics. It is likely that Federal Reserve Chairman Jerome Powell’s obligation to maintain the This rules out the possibility of a first rate cut on the eve of the election. There’s nothing to lose by simply waiting until the election is over, but there’s a lot to risk if you don’t. Biden’s public bet that the Fed will cut rates could even be harmful The potential cuts risk creating the impression that changes are being made by presidential order.
As mentioned previously, there is a non-zero chance that the Fed’s next action will be to raise interest rates.and Rate hikes are increasingly likely.
“While this is not my baseline outlook, we continue to see the risk that we may need to raise policy rates further at future meetings if inflation stalls or reverses,” he said. I’m watching,” he said. Michelle Bowman, Federal Reserve President he said in a speech this week.
There will be no cuts before the election. For Mr. Biden to claim that there is, only makes him look further removed from reality.
